AA Plc (AAAA) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for AA Plc (United Kingdom)

Based on various researches at Oak Spring University , AA Plc is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing transportation and logistics costs, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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Introduction to SWOT Analysis of AA Plc

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AA Plc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AA Plc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AA Plc operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of AA Plc can be done for the following purposes –
1. Strategic planning of AA Plc
2. Improving business portfolio management of AA Plc
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AA Plc

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Strengths of AA Plc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of AA Plc are -

Successful track record of launching new products

– AA Plc has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AA Plc has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Ability to lead change in Business Services

– AA Plc is one of the leading players in the Business Services industry in United Kingdom. Over the years it has not only transformed the business landscape in the Business Services industry in United Kingdom but also across the existing markets. The ability to lead change has enabled AA Plc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– AA Plc has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Highly skilled collaborators

– AA Plc has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Business Services industry. Secondly the value chain collaborators of AA Plc have helped the firm to develop new products and bring them quickly to the marketplace.

Effective Research and Development (R&D)

– AA Plc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – AA Plc staying ahead in the Business Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Strong track record of project management in the Business Services industry

– AA Plc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Analytics focus

– AA Plc is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Business Services industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Digital Transformation in Business Services industry

- digital transformation varies from industry to industry. For AA Plc digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AA Plc has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

High brand equity

– AA Plc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AA Plc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Superior customer experience

– The customer experience strategy of AA Plc in Business Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Diverse revenue streams

– AA Plc is present in almost all the verticals within the Business Services industry. This has provided AA Plc a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Organizational Resilience of AA Plc

– The covid-19 pandemic has put organizational resilience at the centre of everthing AA Plc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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Weaknesses of AA Plc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of AA Plc are -

High cash cycle compare to competitors

AA Plc has a high cash cycle compare to other players in the Business Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

High bargaining power of channel partners in Business Services industry

– because of the regulatory requirements in United Kingdom, AA Plc is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Business Services industry.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, AA Plc is slow explore the new channels of communication. These new channels of communication can help AA Plc to provide better information regarding Business Services products and services. It can also build an online community to further reach out to potential customers.

Workers concerns about automation

– As automation is fast increasing in the Business Services industry, AA Plc needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Low market penetration in new markets

– Outside its home market of United Kingdom, AA Plc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High operating costs

– Compare to the competitors, AA Plc has high operating costs in the Business Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract AA Plc lucrative customers.

Need for greater diversity

– AA Plc has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Compensation and incentives

– The revenue per employee of AA Plc is just above the Business Services industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Increasing silos among functional specialists

– The organizational structure of AA Plc is dominated by functional specialists. It is not different from other players in the Business Services industry, but AA Plc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help AA Plc to focus more on services in the Business Services industry rather than just following the product oriented approach.

High dependence on AA Plc ‘s star products

– The top 2 products and services of AA Plc still accounts for major business revenue. This dependence on star products in Business Services industry has resulted into insufficient focus on developing new products, even though AA Plc has relatively successful track record of launching new products.

No frontier risks strategy

– From the 10K / annual statement of AA Plc, it seems that company is thinking out the frontier risks that can impact Business Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

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AA Plc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of AA Plc are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects AA Plc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, AA Plc can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help AA Plc to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Lowering marketing communication costs

– 5G expansion will open new opportunities for AA Plc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Business Services industry, and it will provide faster access to the consumers.

Use of Bitcoin and other crypto currencies for transactions in Business Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AA Plc in the Business Services industry. Now AA Plc can target international markets with far fewer capital restrictions requirements than the existing system.

Creating value in data economy

– The success of analytics program of AA Plc has opened avenues for new revenue streams for the organization in Business Services industry. This can help AA Plc to build a more holistic ecosystem for AA Plc products in the Business Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Better consumer reach

– The expansion of the 5G network will help AA Plc to increase its market reach. AA Plc will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Leveraging digital technologies

– AA Plc can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Loyalty marketing

– AA Plc has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Using analytics as competitive advantage

– AA Plc has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Business Services sector. This continuous investment in analytics has enabled AA Plc to build a competitive advantage using analytics. The analytics driven competitive advantage can help AA Plc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. AA Plc can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Low interest rates

– Even though inflation is raising its head in most developed economies, AA Plc can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Building a culture of innovation

– managers at AA Plc can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Business Services industry.

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help AA Plc to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

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Threats AA Plc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of AA Plc are -

Consumer confidence and its impact on AA Plc demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Business Services industry and other sectors.

Shortening product life cycle

– it is one of the major threat that AA Plc is facing in Business Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, AA Plc can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate AA Plc prominent markets.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Business Services industry are lowering. It can presents AA Plc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.

Stagnating economy with rate increase

– AA Plc can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Business Services industry.

Technology acceleration in Forth Industrial Revolution

– AA Plc has witnessed rapid integration of technology during Covid-19 in the Business Services industry. As one of the leading players in the industry, AA Plc needs to keep up with the evolution of technology in the Business Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for AA Plc in the Business Services sector and impact the bottomline of the organization.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of AA Plc business can come under increasing regulations regarding data privacy, data security, etc.

Easy access to finance

– Easy access to finance in Business Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AA Plc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Environmental challenges

– AA Plc needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. AA Plc can take advantage of this fund but it will also bring new competitors in the Business Services industry.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Regulatory challenges

– AA Plc needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Business Services industry regulations.

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Weighted SWOT Analysis of AA Plc Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AA Plc needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of AA Plc is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of AA Plc is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of AA Plc to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that AA Plc needs to make to build a sustainable competitive advantage.

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